Sean Lightbown May 16, 2017
The breathtaking pace of Chinese outbound M&A last year had many commentators heralding a new era for dealmaking, with a seemingly never-ending flow of capital seeking investment targets in the West. On the face of it at least, the recent news that the majority of Syngenta (SIX: SYNN) stakeholders have accepted ChemChina’s $43 billion takeover offer fits in well with that narrative.
However, PitchBook data shows that, while Chinese M&A activity in Europe skyrocketed 53% to 113 deals in 2016, it has stalled dramatically this year with just 16 completed acquisitions up to 16 May. That downturn echoes similar YoY trends for Chinese corporate M&A activity in the US.
Why the slide? Western governments have historically been hostile to large Chinese takeovers, and the continuation of this opposition is one factor. The Committee on Foreign Investment in the United States, for instance, has recently stepped up its resistance to Chinese takeovers, and in November raised concerns over Fujian Grand Chip Investment Fund’s potential acquisition of German tech company Aixtron before the deal was blocked. A month later, a Chinese consortium that included Sanan Optoelectronics stopped pursuing a bid for lighting group Osram amid mounting political opposition in Germany.
On top of this scrutiny, Chinese acquirers have been facing pressure at home. A string of capital controls introduced by the government late last year curbed outflows of cash, which choked the supply of outbound investor capital. According to China’s State Administration for Foreign Exchange, banks recorded a $3 billion surplus in foreign exchange receipts and payments in 1Q 2017 compared with a $36.6 billion deficit for the same period last year.
This may not mean the death knell for Chinese investment in Europe, however. In April, Beijing lifted the ban on cross-border capital flow, turning the tap back on for would-be investors. On top of this development, deals in Europe are still up for grabs, as evidenced by China Renaissance Capital’s acquisition of Bosch’s starter motors and generators unit this month.
PitchBook Platform users can access the full M&A dataset on China's corporate activity in Europe.